It is common knowledge in the medical community that medical bills contain billing errors, intentional upcoding, over charging, unbundling, over treating, CPT code errors, incorrect modifiers, medical errors, incorrect location, incorrect time units, medical necessity, use of an assistant surgeon, a surgeon billing who did not perform the operation and other inefficiencies that increase the amount of money owed by the patient/guarantor. It is also becoming more common for companies to negotiate down the patient's responsibility for the medical bill or to audit the bill for incorrect charges. Companies generally do this on a fee-for-service basis or on a contingency fee basis.
Purchasing debt liabilities from a creditor is not new. An example is ABC Company purchasing credit card debit from a credit card company for $0.06 on the dollar and then pursuing the debt for the full amount due from the debtor. Example, ABC Company will pay the credit card company $100,000 for $6,000,000 in debt owed to the credit card company. In this case, ABC Company bought the debt from the creditor so the debt had no asset attached to it in the form of repayment from cardholders as credit cards are unsecured loans.
Assuming debt as part of a larger asset purchase has also been common. An example is XYZ Corporation will sell an operating unit to 123 Corporation in exchange for stock in 123 Corporation and 123 Corporation assuming the full amount of an outstanding debt due. In this case, the assumption of the debt is part of the overall asset purchase, and is a mechanism used to provide consideration (consideration as used in contract law) in lieu of a cash payment.
Transferring debt as part of a business dissolution or marital divorce also is not new. In these situations, a court will order one party to pay an outstanding debt as part of the dissolution of the two parties. However, in this case, the debt is part of an asset liability distribution ordered by a court and is therefore applied in a different context than the present invention. For example, the debt is not sold to a third party.
Viatical Settlements also have become common Viatical Settlements use the practice of “assigning a benefit (a/k/a asset)” from an insurance company for the policy owner to a third party in exchange for paying the ongoing premiums and a monetary payment to the policy holder. As will be explained below, the present invention is different because only “debt” is being assigned/transferred/incurred, whereas Viatical Settlements transfer the monetary insurance benefit (the asset) and the on-going premium payments are made by the Viatical Settlement company to ensure there is no denial of a benefit payout due to non-payment of premiums.
A system and method is described that, unlike these prior art methods, allows an entity to create value in debt liabilities for unsecured debts. The invention is directed to such a system and method.